IMPACT OF THE SECOND TIER SECURITIES MARKET ON SMALL SCALE INDIGENOUS INDUSTRIES IN NIGERIA

ABSTRACT

This project work is centred on the impact of the Second-Tier Securities Market on small-scale indigenous industries in Nigeria.

The study was conducted to identify the extent to which indigenous businesses in Nigeria are using the Second-Tier Securities Market of the Stock  Exchange as a source of long-term finance for their investment.

Four research questions and three hypotheses guided the study. The population for the study consisted of all the population selected from small-scale enterprises and approved stockbrokers including those that successfully floated indigenous business in the Second-Tier Market. A sample of five (5) small-scale enterprises in Lagos was drawn through random sampling technique. A structured questionnaire containing 18 items was used for the data collection. A point scale in the questionnaire and percentage were the statistical tools used for the data analysed. The three hypotheses were tested at 0.05 level of probability.

The findings of the study revealed among others that: the response on the second-tier securities market is very low due to the general level of awareness on the economy even among the literate population. Even with the small number of educated population who invested in the stock market, the demand for shares often exceed supply because of the small proportion available for trading.

Based on the findings of the study, a number of recommendation were made among which is that a formal market for unlisted securities should be developed so that companies which do not wish to be quoted on the Stock Exchange could approach this formal market.                     

CHAPTER ONE

1.1 BACKGROUND OF THE STUDY

The small scale industrial undertaking has been widely acclaimed as the bedrock for any meaningful industrialization programme of any nation especially in less developed countries. It is in realization of this that government all over the world has devoted much of the sources and effort towards the development of such industries. In Nigeria for instance, the government started its deliberate efforts to develop this sector since the early 70s through policies contained in the National Development plans. Furthermore, financial institutions particularly the development, commercial and merchant banks have been made to extend to a certain percentage

Despite all those efforts, the growth of small scale industries has been greatly hindered mostly by lean financial resource of their promoters.         Most of the business concerns do not have access to the capital market from where long term finance suitable for sustenance of business expansion could not meet the requirement that would afford them the opportunity of raising funds through the capital market.

Nigeria entrepreneurs have been apathetic to seeking public quotation by getting listed on the Nigerian stock exchange. As at 1982, only three wholly owned Nigerian companies were listed on the Nigerian stock Exchange market though the Nigerian stock exchange had been in existence since 15th September 1960. a significant move towards public quotation among Nigerian companies was achieved during the indigenization exercise of 1972.

The programme compelled hitherto foreign dominated business enterprises to all carrying consequently the number of listed companies as at the end of may 1985 moved up to 44 but it is prompted a seminar on public quotation for indigenous companies organized by the GLAXOSMIHKLINE NIGERIA PLC in Lagos 1n 1981.

A.           High cost of seeking quotations

B.          Fear of losing control of the business upon obtaining quotation

C.          Personal convictions (Egocentric reason)

D.          Reluatative disclose occurrence financial information little or no knowledge of the capital market

In effect the resolutions formed the bedrock of the introduction of the second tier security market (SSM) which was launched on 30th April, 1985. In Nigeria, the SSM is per after then the unlisted company Market (UCM) in the unit kingdom its primary aim is to provide a platform for small scale businesses quotation. The main impetus for the establishment of the second tier security business is to seek quotation on this market.